Government Relations: Economic Downturn Hits the States
By Mark F. Smith
The 1990s were very good for higher education. On average, state tax appropriations on higher education from fiscal 1992 to fiscal 2002 increased 59 percent. Thirty states increased their spending by over 50 percent during the decade, and another sixteen elevated theirs by more than 30 percent. Mississippi led the states by increasing its spending by slightly more than 118 percent over the ten-year period.
Yet Mississippi also serves as a reminder that the downturn in the national economy has hit the states. Over the past two years, Mississippi has decreased its tax expenditures on higher education by 7.7 percent, which puts it fiftieth among the states. More than two-thirds of the states are facing budget deficits. And, unlike the federal government, most states have constitutional mandates to balance their budgets from year to year.
The bulk of state spending goes to three areas: crime, health and welfare, and education. When the economy contracts, unemployment goes up, and the need for spending on health, welfare, and crime seems much more immediate. Education funding is always more of a long-term investment and seems harder to justify in the immediate presence of an emergency.
Moreover, education funding is usually discussed at the state level in terms of primary and secondary education. Every legislative district in every state has primary and secondary schools within its boundaries, as well as students, teachers, and parents of school-age children. Although many also contain institutions of higher education, the numbers are not as overwhelming. As a result, the commitment to primary and secondary education usually overshadows that to higher education. Unfortunately, some states see conflicts between the two sectors, which hurts both, but which tends to hurt higher education more.
For example, in Alabama the governor imposed a 6.2 percent decrease in public education funding in response to a budget crisis in February 2001. A state court ruled that elementary and secondary education were essential state functions, so the governor moved to concentrate the cuts in higher education. Some colleges and universities suddenly found themselves facing 18 percent cuts in previously approved spending. Subsequent court decisions spared higher education the worst of the cuts, but the outlook remains bleak.
Ohio is facing a different scenario. After passage of a bill decreasing state aid to higher education, several state institutions proposed severe tuition increases. The presidents of state institutions had warned of such a response to reductions in the state subsidy for higher education. Ohio State University has proposed a 34 percent tuition hike, and Ohio University is proposing a 20 percent increase. The governor has publicly chastised the presidents, and some legislators are talking of reimposing tuition caps. Ohio had a tuition cap until early 2001, when the legislature repealed it because of the economic downturn. One state senator has offered an alternative approach in the form of a resolution that would lower college tuition by restoring $100 million to the Ohio board of regents' operating budget.
Wisconsin is another state facing a shortfall because revenue expectations are down. Last fall, the governor ordered an across-the-board 3.5 percent cut, but exempted instructional budgets for colleges. In January the governor proposed a more extensive reduction in state spending in order to avoid tax increases. The governor, who took over in midterm when former governor Tommy Thompson moved to Washington to become the federal Secretary of Health and Human Services, is facing reelection this fall. He is so defensive about the projected deficits that he has put up a link on the governor's official Web site to a report showing the budget deficits of other states thus stressing that Wisconsin is not alone.
Congress created the National Commission on the Cost of Higher Education in 1997 in response to public concern about the rising price of a college education. The commission's final report emphasized the difference between the concepts of "cost" (what is spent to educate each student) and "price" (what students are charged and what they pay) in higher education. Financial aid packages and state subsidies change the price but not the cost. The commission concluded that a relative drop in state aid was the primary factor responsible for the rising price of a college education. Given that states were increasing their aid to higher education in absolute terms at that time, the projected decreases in state aid in the next few years will be that much more devastating.
Mark Smith is AAUP director of government relations.
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